amid drought and surging computing demand
| Key Points |
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Dust hangs over the paddocks near Horsley Park in western Sydney most winter afternoons.
Farmers here watch cranes rise beside empty fields, marking new data centre foundations. Nearby dams sit lower than usual, a quiet reminder of the drought tightening its grip.
This corner of Sydney sits at the centre of two forces reshaping Australian energy policy. The federal government has set an emissions target of 62 to 70 per cent below 2005 levels by 2035.
Meeting it depends on taming booming data centre power use while surviving an intensifying El Niño cycle.
Prime Minister Anthony Albanese announced the 2035 target in September 2025, accepting independent advice from the Climate Change Authority. Treasury modelling underpinning the target assumes rapid electrification and sustained renewable investment through the 2030s. Unlike the legislated 2030 goal, the 2035 figure currently carries no legislative backing.[1]
Electricity generation and light transport are decarbonising fastest, aided by falling renewable costs and rising electric vehicle uptake. Heavy industry and agriculture lag further behind, facing costly technology gaps and limited low emissions alternatives. Closing that gap within a single decade will strain both investment capacity and regulatory patience.
Australia's commitments sit within the Paris Agreement framework, which requires progressively stronger national contributions over time. A July 2025 International Court of Justice opinion confirmed treaty obligations to protect the climate system apply broadly. Falling short of the target risks reputational damage and diplomatic friction at future negotiations.[1]
Climate Council analysis frames the 62 to 70 per cent range as a floor rather than a genuine ambition ceiling. Independent modelling suggests a 75 per cent cut remains achievable, given Australia's renewable resources and skilled workforce. Two thirds of Australians reportedly back a stronger target, alongside hundreds of major businesses.[2]
The Australian Energy Market Operator expects data centre demand within the National Electricity Market to triple by 2030. Consumption is forecast to reach nearly 12 terawatt hours, roughly enough to power every home in Victoria. Some connection requests are considered phantom demand, meaning true growth may prove smaller than headline figures suggest.[3]
The Clean Energy Finance Corporation projects data centres could reach 11 per cent of national electricity consumption by 2035. That share sits far above the roughly one per cent recorded in 2025. Investment in the sector is expected to reach up to 135 billion dollars over the coming decade.[4]
Comparable pressures have already emerged overseas, where rapid data centre growth strained ageing electricity networks. Dublin's regulator imposed a de facto connection moratorium in 2021 after operators consumed a fifth of national supply. New Irish rules now require fresh facilities to bring dispatchable generation matching their own demand.[5]
Canberra is moving toward similar obligations, requiring large facilities to become net generators of renewable energy. Under the proposal, operators would fund new generation and cover their share of network upgrade costs. Federal legislation is expected before Parliament in early 2027, following state level agreements reached in mid-2026.[9]
The Bureau of Meteorology confirmed an El Niño was underway in mid-June 2026, following months of Pacific warming. Forecasters expect the event to intensify through spring and summer before easing in early 2027. Some analysts describe it as among the strongest events observed since the 1950s.[6]
El Niño conditions typically suppress rainfall across the Murray Darling Basin, reducing inflows that feed hydroelectric generation. Lower dam levels constrain output from Tasmania's and the Snowy scheme's hydro assets during peak demand periods. Reduced hydro availability places greater reliance on gas, batteries and interconnectors to preserve reliability.
Prolonged heat and dry conditions raise bushfire risk to transmission corridors carrying power across the eastern seaboard. During the 2019-20 Black Summer, TransGrid recorded 249 bushfire related transmission faults, twenty times the historical average. Vegetation clearance and reinforced towers have improved resilience, though risk still rises sharply in dry years.[7]
Heatwave driven cooling demand can coincide with reduced wind output and stressed transmission during fire weather. That overlap produced tight reserve margins during the 2019-20 summer, prompting emergency market interventions. Planners regard that season as the clearest template for managing 2035's compounding pressures.
Australia's major transmission projects have slipped roughly two years behind schedules set in 2024. The Victoria to New South Wales Interconnector West alone has seen cost estimates roughly double toward 7.6 billion dollars. Peak construction activity is now expected in 2030, later than earlier system plans assumed.[8]
Gas peaking plants are increasingly framed as bridging infrastructure, filling gaps left by intermittent wind and solar. Planners expect peaking gas capacity to expand significantly this decade to preserve system reliability during firming shortfalls. Continued gas reliance sits uneasily alongside the deep decarbonisation the 2035 target ultimately requires.
Renewable energy zones remain central to the transition, bundling wind, solar and storage behind shared transmission corridors. Several zones have progressed to financial close, though full capacity delivery now stretches toward 2031. Investment settings continue evolving as governments respond to cost blowouts and community concerns.
Grid connection queues pose a further threat, with wind projects taking well over a thousand days on average to connect. Surveys of developers found most approvals ran more than a year behind original timelines. Without faster processing, some renewable capacity risks arriving well beyond 2035, undermining the emissions trajectory.
Debate now centres on who pays for grid capacity built primarily to serve data centre load growth. Proposed national standards would shift new generation and network costs onto operators rather than households. Energy ministers from most states endorsed a fully offsetting obligation for new facilities in May 2026.[9]
Competition for scarce renewable electricity between hyperscale computing and household demand carries clear political risk. Overseas experience shows concentrated data centre load can push wholesale and retail prices sharply higher. Public backlash against visible price rises could complicate both approvals and emissions policy simultaneously.
The federal government has pursued parallel priorities, fast tracking major data centre approvals while tightening renewable obligations. Fifteen data centre projects worth 51.9 billion dollars received prioritised support through national approval processes in early 2026. Officials argue coordinated standards can reconcile digital growth with climate commitments rather than undermine them.
Regional and Indigenous communities increasingly shape decisions about where new transmission and generation infrastructure gets sited. Analysts note developers often bring far greater negotiating resources than the communities whose land hosts new projects. Fairer bargaining, transparent pricing and expert support are being urged to strengthen Indigenous self-determination.[10]
Australia's 2035 target sits at the intersection of ambition and constraint. Unlegislated policy, surging computing demand and an intensifying El Niño cycle together test the credibility of the plan. Each pressure compounds the others across a single strained decade.
Grid investment is accelerating, yet transmission delays and connection queues threaten to outpace both electrification and digital growth. Data centre operators face new obligations to fund their own renewable capacity, easing pressure on households. Regional and Indigenous communities deserve a fairer share of that bargaining power.
Whether Canberra reaches 62 per cent depends on faster infrastructure delivery, fairer cost sharing and genuine accountability. The coming Super El Niño summer will offer an early, unforgiving verdict on that readiness.
References
1. Australia sets 2035 emissions reduction target. Herbert Smith Freehills Kramer confirms the 2035 target remains unlegislated, unlike the 2030 goal.
2. Everything you need to know about Australia's 2035 climate target. Climate Council analysis argues the 62 to 70 per cent range represents a floor rather than genuine ambition.
3. Seizing the opportunity to do data centres right. Climate Council cites AEMO forecasts of tripling data centre demand in the National Electricity Market.
4. Data centre boom to reshape Australia's energy future. CEFC and Baringa modelling projects data centres reaching 11 per cent of national electricity consumption by 2035.
5. New Irish data centres must generate power back into national grid, rules regulator. Pinsent Masons outlines Ireland's revised data centre grid connection framework after its Dublin moratorium.
6. El Niño: what it means for Australia's climate. The Bureau of Meteorology outlines the confirmed 2026 El Niño and its likely intensification through summer.
7. 2019-20 Bushfire Damage to TransGrid Network. The Australian Energy Regulator's report records 249 bushfire related transmission faults during Black Summer.
8. Australia's biggest transmission project energised after delays and cost overruns. RenewEconomy details cost blowouts and schedule slippage across major NEM transmission projects.
9. Australia's data centre energy rules take shape. PV Tech reports on proposed rules requiring data centres to become net generators of renewable energy.
10. Indigenous Australians are crucial to hitting our 2035 climate targets. The Conversation examines fairness gaps facing Indigenous communities hosting new energy infrastructure.
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